In The News › Developers to ask city for tax break on hotel

Sep 18, 2007

Source: Times-Picayune

Developers to ask city for tax break on hotel

Developers to ask city for tax break on hotel
Piazza d’Italia plan runs into call for moratorium
Tuesday, September 18, 2007
By Greg Thomas
Real estate writer

The developers of the Loews Hotel New Orleans will ask the Industrial Development Board today to approve tax subsidies so that they can build two new hotels even as the Bureau of Governmental Research calls for a moratorium on all such property tax breaks.

The two hotels, which would together account for 300 rooms and include a 10,000-square-foot restaurant, would be in the same block as the Loews Hotel but on the other side of the Piazza d’Italia, an architectural park renovated when the developers built the Loews.

The two hotel buildings would round out development of the city-owned property that developers Darryl Berger, Roger Ogden and Steve Rittvo have a 99-year lease on. The developers have long had plans for the site surrounding the architectural monument. They say they could build the new hotel as long as they are granted tax-exempt GO Zone bonds and a payment in lieu of taxes, or PILOT, which would freeze property taxes at predevelopment levels.

This is the second major project in as many weeks that Berger and Ogden have introduced and are seeking tax help on. Berger and Ogden are also proposing a massive high-rise hotel at Canal Place. For that project, the developers are also seeking $190 million in GO Zone bonds and a PILOT.

The repeated requests by Berger, Ogden and other developers for tax breaks on the new construction projects they are planning has raised the ire of BGR Executive Director Janet Howard.

In a statement released Monday, Howard cited a “massive surge” in developer requests for tax breaks. “Negotiating taxes is rapidly becoming standard procedure for new projects in New Orleans,” Howard wrote.

By awarding tax breaks to projects that don’t really need them, the board is whittling away the city’s tax base, said Howard, who does not take issue with the award of GO Zone bonds.

Jim Thorns, president of the Industrial Development Board, defended his group Monday. “The city is not losing a penny in the projects operating or under consideration, because more taxes are being received than before” the subsidy, he said.

The IDB has also been working on more standard policies and procedures so that it can more thoroughly vet the many applications it receives from developers seeking tax help. “We’re working through procedures and policies, but BGR is just a big distraction,” Thorns said.

Developers, including Berger and Ogden, say the tax breaks awarded by the board are crucial for getting their deals off the ground. PILOTs and tax-increment financing agreements, in which a portion of the future sales taxes generated from the new project are used to cover development costs, are especially important to developers because GO Zone bonds are likely to be difficult for developers to obtain. Fierce competition for GO Zone bonds, which the Industrial Development Board gives preliminary approval for, has left that pool of money in short supply.

GO Zone bonds or other subsidizes are essential for any large projects, Berger said.

But Howard says developers are relying too heavily on PILOTs and tax-increment financing.

Prior to Hurricane Katrina there were three active (tax-increment financing arrangements) in New Orleans and 11 active or approved PILOTs, Howard said.

The number of PILOTs has since risen to 16, and there are currently 48 requests for PILOTs pending before the board, Howard said.

“The men and women . . . on (the Industrial Development Board) endure such hard work in trying to rebuild this city, and they have to listen to the chronic belly aching from BGR without a single bit of positive contribution,” Thorns said. “It’s pathetic. BGR should close its doors and get out of the city if they’re going to get in the way of those trying to rebuild New Orleans.” “Right now the IDB is the only agency working its tail off to get to rebuilding,” Thorns said.

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Greg Thomas can be reached at gthomas@timespicayune.com or (504) 826-3399

Sep 18, 2007

Source: Times-Picayune

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